Biofuels industry criticizes content of House RFS hearing

On June 5, the House Committee on Oversight and Government Reform Subcommittee on Energy Policy, Health Care and Entitlements held a hearing on the federal renewable fuel standard (RFS). The hearing, titled “Up Against the Blend Wall: Examining EPA’s Role in the Renewable Fuel Standard,” featured testimony from representatives of the U.S. EPA, the American Petroleum Institute, the Energy Policy Research Foundation Inc., the National Turkey Federation, and the Union of Concerned Scientists. Representatives of the biofuels industry were quick to point out that the hearing was one-sided in favor of Big Oil, providing members of Congress with a skewed impression of the RFS.

Committee Chairman James Lankford, R-Okla., opened the hearing by claiming there is increasing evidence that the RFS is not meeting its original bi-fold purpose of increasing energy independence and security while increasing the production of renewable fuels.

Lankford also noted market changes that have taken place since the RFS was originally enacted in 2005 and expanded in 2007. “We were living in a different time and the drafters assumed gas demand would continue to increase,” he said. “Since then, the recession and increased CAFE standards have pushed down the demand for gasoline.” Lankford also mentioned the current domestic energy boom, which he said is “leading is to greater energy independence and security by leveraging our domestic petroleum suppliers.” In addition, he addressed the blend wall, consumer demand for ethanol, and cited a study by consulting firm NERA said mandating E15 could increase the cost of gasoline by 30 percent and the cost of diesel by 300 percent by 2015.

During his statement, Lankford also addressed the goal of the hearing. “The goal of this hearing is to see how we can alleviate the pressure on consumers,” he said. “One way to do this is to change the law. That is the job of the Energy & Commerce Committee, not this Committee. This Committee oversees how the executive branch is implementing the current law. Today, we will seek to learn what EPA can do, has done, or has not done to ease the burden on consumers.”

Christopher Grundler, director of the Office of Transportation and Air Quality and Office of Air and Radiation at the EPA, provided an overview of the RFA program as part of his testimony. He also addressed the blend wall, noting that as the volume requirements of the RFS program increase, it becomes more likely that the volume of ethanol projected to meet those requirements will exceed the volume that can be consumed in an E10 blend. Additional volumes would then need to be used in higher blend levels, such as E15 or E85. Grundler also noted that cellulosic and advanced biofuels will play a larger part in meeting RFS requirements in the future.

According to Grundler, the EPA will continue to look at the potential impacts of the E10 blend well in both the near term and long term. He also noted the agency is currently reviewing comments submitted in response to its proposed rulemaking for the 2013 RFS volume standards, and will carefully consider input from those comments.

In his testimony, Jack Gerard, president and CEO of the API, claimed the RFS is “irreparably broken and posed to do significant harm to consumers, the economy and the nation’s fuel supply.” Gerard also said, “The impact of the mandate has been made worse by EPA’s unwillingness to let science, court decisions, and common sense guide its implementation.” During his testimony, Gerard criticized the EPA’s decision to approve E15 and called the agency’s implementation of the RFS “galling,” claiming that the agency has set unrealistic cellulosic standards.

Lucian Pugliaresi, president of the Energy Policy Research Foundation said research conducted by his organization found that near-term increases of blending over the blend wall would only be possible by encouraging consumers to buy E85 and shifting that cost onto E10, which he said the Energy Policy Research Center Foundation believes will increase the cost of E10 by 36 cents per gallon by 2022. “Our research shows that to prevent a rapid increase in gasoline prices, EPA should not only immediately issue a waiver holding volumetric mandates for renewable fuels at no more than 10 percent of the gasoline pool, but also signal its intention to extend the waiver beyond one year,” Pugliaresi said.

Joel Brandenberger, president of the National Turkey Federation, is also critical of the RFS, claiming “nothing but the RFS is to blame” for a 10 percent decrease in turkey production relative to its 10-year high. He also blamed the RFS for rising corn prices, increased food prices and a decrease in job creation in the food sector.

In his testimony Jeremy Martin, a senior scientist with the Union of Concerned Scientists Clean Vehicles Program, painted a much less bleak picture of the RFS. “It is important to start by acknowledging the important role that the RFS plays in achieving a cleaner fuel future,” he said. Along with other technologies, Martin noted that expanded production of biofuels can cut our projected oil use in half over the next 20 years. He also stressed that the RFS is not static, and requires the biofuels industry to get cleaner over time. In addition, the noted that RFS recognizes the limited potential to use food as fuel, and relies on cellulosic biofuel to meet an increasingly larger portion of the volume mandate moving forward.

Martin also said that policy, including tax policy, trade policy, agricultural policy and policy on fuel additives has contributed to problems many people associate with the RFS, including accelerated deforestation, higher food prices, and water pollution. “Reversing course on the RFS will not solve these problems,” he said. “So failing to deliver on the full vision of the RFS means we stay where we are, with corn ethanol and gasoline, but with no prospect of moving to cleaner biofuels going forward. Rather than locking in the status quo, the smart choice is to keep moving forward on the longer-term goals of the RFS, the goals of better biofuels that go beyond food.”

In response to the information presented at the hearing, Michael McAdams, president of the Advanced Biofuels Association, said that several stakeholder groups are attempting to create the perception that the RFS is broken and should be repealed rather than allowing EPA to utilize its authority to make any required adjustments. “That would be a step backward in America's energy future,” he said. “Right now, many of the advanced and cellulosic companies are seeking to break ground or attempting to raise funds to build their first plants. This entire discussion has had a negative impact on these businesses and their financial community.”

Growth Energy was also critical of the testimony presented, noting that no biofuel producers or stakeholders were invited to testify. “At a time when gas prices keep going up, the House Subcommittee on Energy Policy should be looking at why these prices are consistently near record levels, instead of parading a litany of critics of the only cost-competitive alternative to oil before the committee. While the oil industry enjoys record profits and blocks any attempts for alternatives to enter the market, millions of Americans struggle to afford to fill up their cars. Even though solutions exist, the oil industry would rather distort the facts, play the blame game and erect market barriers, rather than adopt a viable solution that saves Americans money and allows for a choice and savings at the pump,” said the organization in a statement. “Today’s hearing is nothing more than a forum for those with a vested interested in not wanting to see our nation adopt an alternative to a fossil-based fuel. Instead of finding solutions to gas prices, all it accomplishes is giving a microphone for special interests to deny consumers a cost-saving choice at the pump.”

In addition, Growth Energy also specifically criticized the testimony of Brandenberger. “Obviously the Turkey Federation is only interested in cheap feed. We are deeply sorry to hear that their feathers are ruffled, but blaming ethanol for their problems simply does not add up. The facts do not support it, and no matter how many times they repeat this misinformation, it will not change reality,” Growth Energy said.

Brian Jennings, executive vice president for the American Coalition for Ethanol, spoke out to thank the Union of Concerned Scientists for reiterating the position that Congress should not make any legislative changes to the RFS. “ACE and UCS don’t agree on everything, but we proudly stand with them in support of the RFS,” he said. Jennings also stressed that the RFS has worked as intended since its inception. “Since it went into effect, oil imports have been cut from 60 to 45 percent, while also providing over 380,000 jobs, and helping consumers save at the pump while burning a cleaner and more affordable alternative,” he continued.

Fuels America also criticized the hearing for providing only the perspective of Big Oil. “The oil industry does not deserve yet another platform to blame the renewable fuel industry for a bogus blend wall they themselves created. And the oil industry certainly does not deserve to threaten to pass the cost of their own inaction on to hardworking, American consumers,” said the organization. “Renewable fuels are saving Americans dollars at the pump, and reducing the nation’s dependence on fossil fuels. Big Oil opposes that progress because they want to protect their virtual monopoly over America’s transportation fuels sector. Maintaining the RFS ensures that America’s renewable fuel industry – from traditional, advanced or cellulosic sources – can continue to move the nation off of oil. Today’s hearing was a one-sided distraction from that reality.”

In his response to the hearing, Renewable Fuels Association President and CEO Bob Dinneen stressed that a policy as important as the RFS deserves more than a biased, attack-based, monopoly-protecting Big Oil spotlight. “The focus of the hearing is the Big Oil created blend wall. Big Oil is using fear to protect their total and complete dominance of the fuel market.,” he said. “This is nothing more than a smokescreen meant to distract Americans from the real issues — our addiction to petroleum, our dependence upon foreign oil, the environmental damage from tar sands and fracking, and, let’s not forget, high gas prices. Big oil created the blend wall barrier by refusing to allow access to the market for E85 and resisting with fear and misinformation the use of E15 for those consumers that want to use it. They have had years to prepare and comply with the RFS. Instead, they’ve hired PR firms and lawyers to maintain their monopoly over the fuel market. They created the blend wall and are now complaining about its existence. That is the very essence of hypocrisy.”

Brent Erickson, executive vice president of the Biotechnology Industry Organization’s Industrial & Environmental Section, questioned the committee’s decision not to invite representatives of the advanced biofuels industry to testify. “The first commercial cellulosic biofuel refineries are starting up, and more are scheduled to come online over the next few years. The industry is creating jobs and investment opportunities in nearly every state,” he said. “Moving the goalposts on the industry by undermining the RFS will unnecessarily halt their progress and postpone achieving the nation’s goals of energy security and a healthier economy and environment.”

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